Net Neutrality: An Economic Analysis Público
Lim, Benjamin Alex (2011)
Published
Abstract
This paper explores the filed of net neutrality. Specifically,
it analyzes the social welfare
implications of the zero-price rule and discrimination effects. On
one hand, when the consumers
can only choose either good 1 or good 2, there exists a market with
competitive prices for both
goods when the Internet service providers (ISP) discriminates by
charging a fee to only one of
the content providers (CPs). Under net neutrality, only one content
provider can sustain positve
prices, resulting in losses in consumer's utility, profits of
firms, and ultimately the decrease in
social welfare. On the other hand, when consumers can choose to buy
good 1, good 2, or both
goods, net neutrality proves to be more welfare enhancing because
of an increase in the number
of Internet users, total profits of the CPs, and the total
consumer's utility.
Table of Contents
Table of Contents
1.
Introduction..…………………………………………………………………………1
2. Model
1………………………………………………………………………...……….5
2.1 Net
Neutrality……………………………………….………………….….....…...7
2.1.1 Comparative
Statics………………………………….…….……..............10
2.2 Non-Net
Neutrality……………………………………………......…...….…..10
2.2.1 Comparative
Statics………………………………………..............….….13
2.3 Welfare
Comparisons…………………………………….………........….....14
2.3.1 Comparative
Statics…………………………………….……..............….17
3 Model
2…………………………………………………………………..…….………18
3.1 Net
Neutrality…………………………………………………….........………..20
3.1.1 Comparative
Statics………………………………….…...............………22
3.2 Non-Net
Neutrality…………………………………………......….….……….24
3.2.1 Comparative
Statics……………………………………..............….…….26
3.3 Welfare
Comparisons……………………………………......………….…….27
3.3.1 Comparative
Statics……………………………………..............….…….31
4
Conclusion…………………………………………….………………………...……32
References…………………………………………….………………….……….…….33
Appendix
1…………………………………………….……………….…….….………35
Appendix
………………………….………………………………………….....…...…37
List of Figures
Figure 1: The Structure of the Internet (Model
1)………………………………......…....3
Figure 2: A Continuum of Consumer's Value of Good 1 or Good 2
(Model 1)….....6
Figure 3: Best Responses for CP1 (BR1) and CP2 (BR2) (Model 1
NN)……………..9
Figure 4: Best Responses for CP1 (BR1) and CP2 (BR2) (Modle
1NNN)…………..12
Figure 5: Graph of Consumer's Value of Good 1 and Good 2 (Model
2)…………...19
Figure 6: Best Responses for CP1 (BR1) and CP2 (BR2) (Model 2
NN)……………21
Figure 7: Best Responses for CP1 (BR1) and CP2 (BR2) (Model 2
NNN)………….24
List of Tables
Table 1: Comparative Statics with respect to alpha (Mode1 1
NN)…………….……10
Table 2: Comparative Statics with respect to alpha (Model 1
NNN)…….……….….13
Table 3: Comparative Statics with respect to alpha(Model 1
WF)……….………,.…17
Table 4: Comparative Statics with respect to alpha (Model 2
NN)………….…….…22
Table 5: Comparative Statics with respect to alpha (Model 2
NNN)………….….….26
Table 6: Comparison of Variables in Equilibrium under NN and NNN
(Model 2)..27
Table 7: Comparative Statics with respect to alpha (Model 2
WF)……………….....30
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